Making pay work

Henry Ford revolutionized manufacturing but his workforce almost sunk the success we know today.

Ford was 23 years old when built his first combustible engine on a Michigan farm in 1896. When he founded Ford Motor Company in 1903, it was his third attempt at building a company. At the time, it took twelve and a half hours to build a car. He then discovered the assembly line. 

The rest is history. 

A decade later, Ford Motor Company was making half of all the cars produced in the United States. "Model Ts were rolling off the assembly lines at the rate of one every 10 seconds of each working day,” he wrote. 

The company became an overnight success 20 years in the making revolutionizing transportation and opening up many of the opportunities the Americans enjoy today. 

Yet, the firm’s success was still in jeopardy.

Ford’s factory in Highland Park was experiencing chronic absenteeism and an annual turnover rate of 30%. Factory workers found the work dull, demanding, and occasionally dangerous. Men would quit by simply walking away from the moving conveyor belt which regularly brought car production to a halt. 

The hourly wage system at the time was—and has increasingly proven to be—an inefficient model, exacerbating misaligned incentives. While employers prioritize quality, cost, and efficiency, employees prioritize the number of hours they work, as this directly affects their pay. 

Today, companies often respond by implementing extensive oversight and monitoring. However, this approach frequently backfires. Employees evade supervision when possible and, when not, only meet the minimum expectations required. They become increasingly disengaged, intensified by hard or tedious work, leading to declining morale and eventual attrition.

Faced with this dilemma, Henry Ford responded with a move that made headlines. He announced that Ford Motor Company would double its minimum wage to $5 a day, almost 5x the national salary in 1913. 

Many thought it would bankrupt the company, but the opposite occurred. Mechanics migrated to Detroit in droves for a job, a better life, equitable pay, and the ability to buy the cars they produced. Productivity surged and the company doubled its profits in less than two years. 

Henry Ford called it “the smartest cost-cutting move I ever made.” 

Workers would soon realize that achieving the five-dollar employee benefit came with some performance expectations tracked by Ford's Sociological Department, the precursor to modern-day Human Resources. 

Every worker was guaranteed a wage of $2.50. But to double your take home pay, you had to be diligent and thrifty, among other mandates. 

“Each man's pay is divided into two parts: his wages and his share of the profits hired at an hourly rate… by share of profits is meant that sum which is put into the pay envelopes each pay day, over and above the sum earned and paid as wages,” the employee handbook said. “It is the profit received by an employee that is expected to be of permanent benefit to him, to be saved or wisely invested.” 

Ford's payment scheme had a remarkable impact on workers' finances. The average worker's savings increased tenfold between 1914 and 1919, from $207.10 to $2,171.14. The benefit also doubled Ford’s revenue in the first year alone and grew 20x during the same time period, from $30 million to $600 million.

Henry Ford is known for building better cars. He should also be known for building better compensation, which enabled his workers to live better lives. 

What most people miss is that the five-dollar workday wasn’t just about more pay. It was about a performance-based benefit that instilled a sense of ownership back into one’s work. 

The work was still repetitive and demanding, but it was no longer unsatisfying. Why? It was the worker who now determined how he wanted to show up each day; and, to be rewarded for his labor. As a result, it reduced attrition, increased morale, and drove productivity. 

Like the assembly line, performance-based pay was simply ahead of its time.

At Ezra, we’re inspired by this legacy and have set out to reinvent performance-based pay for a new generation of employers of frontline workers. 

How does it work? Here’s your 3-part plan: first, simplify how frontline workers save, pay down debt, and invest; second, track employee performance in real-time; and third, reward ownership behaviors.  

Simplify workplace savings

Savings are the foundation of performance-based pay because most workers are unprepared for life’s inevitable emergencies. As a result, they don’t show up to work; when they do, they are unproductive; and, when they leave, they cost their employer millions. You hired great workers. Keep them by supporting their ability to direct a portion of their paycheck towards their “permanent benefit.” Your employees are already asking for your help: 75% of them are looking for an easy way to save at work, which has been shown to reduce attrition by up to 30%. 

Your workers already understand what most employers forget. It makes more sense to save now for a future emergency than to be forced to use short-term solutions like early wage access, credit cards, and payday loans that, more often than not, cause greater long-term harm.

So start with workplace savings, emergencies first; then, track how it impacts your business in real-time. 

Track employee performance

Workplace savings should help people prosper and it should also make them more productive in ways that progress your company's goals. So measure how your workforce is performing against the metrics that matter to your business. 

A consumer foods manufacturer; for example, might track the number of graveyard shifts picked up by its production operators or the number of defects at the end of the production line. 

An apparel brand might be focused on driving in-store sales conversions across its numerous retail locations or the number of membership sign-ups secured at the point of sale. 

A hospitality conglomerate might be concerned about customer satisfaction scores or the extending the employment tenure of its staff to ensure continuity and quality of service. 

These metrics are essential drivers of day-to-day operations and reliable predictors of future revenue. But extracting, analyzing, and deriving insights from disparate systems is challenging.

With Ezra, companies are able to gain visibility across payroll, HRIS, and point of sale in a matter of days. This empowers managers to identify high-achieving individuals and teams and better forecast the state of the business. 

Reward ownership behaviors 

Our proprietary technology also allows companies to develop monetary reward schemes aligned to these performance metrics or select from our menu of options contextualized by industry.

But even more: we can adjust the reward in relation to the revenue each employee brings to the business, customizable by team, division, and worksite. 

As you can see, our model is designed to be better than a bonus. With bonuses, money is (almost immediately) spent. With Ezra, money is saved. 

Our model is also better than matching contribution schemes. With dollar for dollar models, the company pays for an employee benefit that rewards participation and has little correlation to the company’s profits. With Ezra, the company pays for performance only after the business has realized profits.

That said, if a company does choose to implement a 1:1 match on savings on our platform, we recommend a cap with a two-tiered reward structure because “the only way to stay within budget is to give smaller rewards to the poorer performers, or even the average ones,” says Lazlo Bock. “That won’t feel good initially, but take comfort in knowing that you’ve now given your best people a reason to stay with you, and everyone else a reason to aim higher.”

Conclusion

The benefits of Ezra are three-fold: workers are motivated to take ownership of their work; rewards are anchored on performance, not participation; and employees build a habit of saving, leading to long-term financial security. 

We can call it the hard upside, the hard downside, and the soft upside. 

The hard upside: The work of your frontline workers determine business revenue and growth. With Ezra, we help companies motivate their employees to not only meet, but exceed performance mandates. 

The hard downside: Churn is expensive. Estimates show U.S. companies incur $1T in losses from employee turnover. With Ezra, we work with margin-sensitive businesses to reduce churn by up to 30%. 

The soft upside: A new generation of talent want to work for companies with brand values that align with their own. With Ezra, we help companies become “best places to work” and win in the war for talent. 

Your people are your business. With Ezra, your employees no longer are a liability but a source of strength: a productive, loyal, stable workforce. 

We know that building a great company is hard work. Building a benefit strategy that helps your employees do their best work and live their best lives shouldn’t be. ◼️